January 07, 2012

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Escalating demand for corporate entertainment space during Indianapolis Colts home games has team owner Jim Irsay wondering whether Lucas Oil Stadium should have been built with more luxury suites.

"Quite frankly, I wish we built 30 or 40 more suites," Irsay told IBJ during a recent interview.

There's good reason to think the Colts have outgrown the stadium-even though it's still four months from completion. The Colts long ago sold all 142 suites for the venue, and have a waiting list 54 deep for the posh luxury boxes, said Greg Hylton, Colts vice president of premium seating and ticket sales.

Team officials say they have no way of expanding the new venue at this point. But the franchise is trying to stay connected to those on the waiting list by sending them gifts, such as season-highlight DVDs, and offering them exclusive opportunities to attend team functions and buy preseason tickets in the new stadium.

The spike in suite demand has come despite their stiff fee-suite leases at Lucas Oil Stadium range from $40,000 to $275,000 annually. That's 17 percent more than RCA Dome suites, which ranged from $34,200 to $235,000. Lucas Oil suites should bring the Colts $14 million a year.

"Indiana is becoming a football state," said Kansas City Star sports columnist Jason Whitlock, who played football alongside former Colt Jeff George at Warren Central High School.

Irsay has good reason to dream of more suites, said Marc Ganis, president of Sportscorp Ltd., a Chicago-based sports business consultancy which counts several National Football League teams among its clients.

"When you start to talk about the revenue from 30 or 40 suites, that starts to become a pretty big dollar amount pretty quickly," Ganis said. "Over a number of years, that can make a big difference for a franchise like the Colts."

No contingency plan

Some NFL venues-including Soldier Field in Chicago-have undergone renovations to accommodate more suites and seats. The $715 million retractable-roof Lucas Oil Stadium was built with no contingency plan for expansion, said Indiana Stadium and Convention Building Authority officials.

Colts and city officials said the size of the facility was determined with input from both sides, after consideration of the market size and estimated demand.

"I don't know if you can ever predict 10 years out," Hylton said. "We felt this facility was built for the long term."

In fees alone, leasing another 35 suites would bring in more than $4 million annually. Add in food and merchandise sales, plus parking and other ancillary spending, and sports business experts estimate the revenue would top $7 million.

According to Forbes magazine, the Colts' 2006 revenue was $184 million, and experts expect the new stadium's enhancements will increase the team's revenue more than 10 percent. Another 30 or 40 suites could swell revenue another 5 percent.

"Even if you have $100 million in the bank, $5 [million] to $10 million is a lot of money," said Larry DeGaris, director of academic sports marketing programs at the University of Indianapolis. "Especially in an environment as competitive as the NFL."

Irsay is feeling pressure from other teams building new, even bigger stadiums, such as Dallas and New York, as well as from aggressive owners such as Washington's Daniel Snyder who are squeezing every dollar out of their team's revenue stream.

Snyder's team offers an ever-expanding array of corporate hospitality services and has brokered new local television and radio deals, increased the team's licensing agreements, and even moved to charge fans to watch practice.

Double whammy

Small-market teams face a double whammy. The player salary cap franchises have to meet to compete is tied to average team revenue. So as teams like Washington and Dallas-which bring in $65 million to $125 million more than the Colts annually-push further ahead, the cap climbs higher and higher.

"Our biggest challenge is that we've been a low-quartile-revenue team," Irsay said. "So I've had to put a lot of my own money into it, and I've lost a lot of money. There's been a lot of money put into making this a winning franchise."

According to Forbes, the Colts were 31st in the 32-team NFL in 2006 revenue generation.

Suites aren't the only thing in demand for Colts games. Virtually the entire 63,000-seat Lucas Oil Stadium is filled for next year with season-ticket holders, and the team has a waiting list of 28,400 fans, Hylton said. Those on the waiting list paid a one-time non-refundable $150 fee. If they ever get season tickets, the fee will be applied to the ticket purchase.

The Colts had better than 99-percent season-ticket renewal this off-season, about 6 percentage points ahead of the NFL league average, sources within the league said.

The team has filled the stadium's 7,100 pricey club seats through season-ticket sales, and the waiting list for those has grown to 3,000, he added.

"Things are really going well for us now," Hylton said. "I think it's a combination of excitement over the new stadium and the product we've put out on the field the last few years."

Inquiries to the Colts continue to pour in.

"We're adding people to the waiting lists every day," Hylton said.

But there's a risk of overbuilding.

"It's difficult to predict demand long term, and a market this size could get much softer," warned DeGaris. "What you don't want is a big, empty upper deck. Baseball learned that lesson. Empty seats are a big problem. It looks bad and the effect snowballs. The same goes for suites."

Supply and demand

Lucas Oil Stadium's size seems about right for Indianapolis, SportCorp.'s Ganis said, and should help the team retain "solid demand and price integrity" for suites, club seats and season tickets.

"It doesn't hurt the team to create a sense of scarcity," DeGaris added. "If you have excess supply, that's not good for a team. You devalue your entire product."

And waiting lists can be tenuous.

"The New York Knicks had a waiting list of 15,000 for season tickets until 2005," DeGaris said. "When that team hit hard times, the waiting list evaporated. Knicks officials went through the entire list, and still couldn't fill Madison Square Garden."

That's why, despite the shortage of inventory for the near future, Colts officials haven't stopped statewide and regional marketing. The franchise takes players, cheerleaders and other team officials to area communities large and small.

"We were marketing more aggressively than we ever have following the 2006 Super Bowl championship," Hylton said. "We're still trying to do our part to reach out and connect with the entire state. The fact that the team shows up in these towns means a lot."

The connections made now could come in handy if the team hits hard times on the field.

"To ensure the long-term growth of the franchise, we have to do a little more," Hylton said. "We can't just sit back and turn the lights on and wait for people to come."

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Reporter, #IBJtech newsletter author

Technology, venture capital, media and marketing

Schoettle grew up in Indianapolis, graduating from Southport High School and Indiana University. He then departed on a tour of middle Indiana, reporting for papers in Greenwood, Frankfort, Columbus and Franklin before landing at IBJ in 1998. At his previous jobs, he spent a decade as a political and government reporter. Beyond writing, Schoettle’s passions include animals and wildlife, watching all manner of television and long-distance cycling and running. Though he put away his trumpet many years ago, he remains an avid music fan. Schoettle shares his home in Southport with his wife, Elizabeth, three salty dogs and three sweet cats. Preferring to live in a “park-like setting,” one of his primary goals each spring and summer is to see how seldom he can mow his front lawn.

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